Circular No. 1268 — Amends the Rural Credit Manual (MCR), which is now composed of two parts: text and documents

CIRCULAR NO. 001268

To
Financial Institutions of the National System of Rural Credit

We communicate that amendments have been introduced into the Rural Credit Manual (MCR), as per the attached pages, intended for its partial update.

2. Consequently, the following chapters and sections are canceled in the manual: "4 - Guarantees", "5 - Expenses" and "6 - Credit Management", as well as sections "7-2 - Supervision", "8-1 - Purposes" and "8-2 - Modalities", integrated into the new chapters now published.

3. Finally, we clarify that the manual is now composed of two parts, being: "1. Part - Text" and "2. Part - Documents". However, the old documents must be temporarily maintained in their respective current chapters until they are replaced by new documents in each case, adding these to Part 2.

Brasília-DF, December 23, 1987

Hélio Ribeiro de Oliveira
Director

---

RURAL CREDIT MANUAL
1st Part - Text (*)
Index of Chapters and Sections

---

1-PRELIMINARY PROVISIONS (*)
1-Introduction
2-National System of Rural Credit
3-Operational Structure
4-Beneficiaries
5-Technical Assistance
6-Financial Sanctions (to be published)
7-Disqualification

2-BASIC CONDITIONS (*)
1-General Provisions
2-Budget, Plan and Project
3-Guarantees
4-Financial Charges
5-Other Expenses
6-Utilization
7-Reimbursement
8-Supervision
9-Special Provisions

3-FORMALIZATION
1-Credit Instruments
2-Rural Credit Warrants
3-Registration of Rural Credit Warrants

Documents
1-Omission of Entries - Draft Office Letter
2-Charge of Excess Emoluments - Draft Office Letter

4-(To be published) (*)

5-(To be published) (*)

6-(To be published) (*)

7-CONTROLS
1-Accounting (*)
2-(To be published)
3-Statistics

Documents
1/3-(Vacant)
4-Credit Instrument
5-Complement of the Credit Instrument
6-Credit Instrument (Continuation Model)
7-Category of the Issuer
8-Programs/Credit Lines
9-Enterprises
10-Remittance Letter
11-BACEN Reference Numbers
12-Municipality Codes
13-RECOR - Exclusion of Registered Warrants

8-OPERATIONS
1-(To be published) ()
2-(To be published) ()
3-Resources

9-COST CREDIT
1-General Provisions
2-Agricultural Costing
3-Livestock Costing
4-Costing of Benefiting or Industrialization
5-Agricultural Costing Rotating Credit

Documents
1-Basic Cost Value (VBC) and Release Calendar
2-Financed Crops - Borrower Communication

10-INVESTMENT CREDIT
1-General Provisions
2-Terms

11-MARKETING CREDIT
1-General Provisions
2-Pre-marketing
3-Discount

12-CREDIT TO COOPERATIVES
1-General Provisions
2-Advances to Members
3-Supply to Members
4-Purchase of Goods for Service Provision
5-Advance of Retention Rate Resources
6-Integration of Quota-Parts
7-Transfers
8-Terms

13-CREDIT FOR PRODUCTION OF SEEDS OR PLANTLETS 1-General Provisions 2-Purposes 3-Terms

14-CREDIT TO FISHING ACTIVITIES
1-General Provisions
2-Costing
3-Investment
4-Marketing
5-Terms

15-CREDIT FOR FORESTRY OR REFORESTATION
1-General Provisions
2-Beneficiaries
3-Tax Incentives
4-Agricultural Costing Integrated with Forestry Projects

16-LAND CREDIT
1-General Provisions

17-(Vacant)

18-MANDATORY RESOURCES
1-Preliminary Provisions
2-Applications
3-Financial Sanitation of Cooperatives
4-Final Provisions

Documents
1-List of Benefited Members with Supplies
2-(To be used)
3-Sanitation - Qualified Cooperatives
4-Control Map of Operations with Mandatory Resources 5-Control Map of Operations with Mandatory Resources - Interbank Agreements

19-AGRICULTURAL AND LIVESTOCK ACTIVITY GUARANTEE PROGRAM (PROAGRO) 1-Preliminary Provisions 2-Beneficiaries 3-Agents 4-Classification 5-Additional 6-Proof of Losses 7-Coverage 8-Criteria for Analysis of Coverage Requests 9-Final Provisions

Documents
1-Municipalities of the Homogeneous Microrégion Chapada Diamantina Setentrional, State of Bahia - "Irecê Region" 2-Progressive Additional Table 3-PROAGRO - Collection of the Additional 4-Communication of Occurrence of Losses 5-Expert Report of Proof of Losses 6-Form for Forwarding Expert Reports 7-PROAGRO - Request for Payment and Reimbursement of Expert Costs, including Remuneration of the Program Agent 8-PROAGRO - Request for Payment and Reimbursement/Expenses of Laboratory Analysis, Topographic Services or Similar, including Remuneration of the Program Agent 9-PROAGRO - Analysis of Coverage Request 10-PROAGRO - Request for Reimbursement of Coverage 11-PROAGRO - Request for Reimbursement of Coverage 12-PROAGRO - Request for Reimbursement/Return 13-PROAGRO - Request for Reimbursement

20-CREDIT FOR MECHANIZED SERVICE PROVISION
1-General Provisions
2-Costing
3-Investment
4-Terms

21-CREDIT TO AGRICULTURAL AVIATION
1-General Provisions
2-Credit to Rural Producer
3-Credit to Agricultural Aviation Company
4-Credit to Rural Producer Cooperatives
5-Special Conditions

22-MINIMUM PRICE GUARANTEE POLICY
1-General Provisions
2-Attributions of the Central Bank and the Production Financing Company 3-Financial Agents 4-Beneficiaries 5-Resources 6-Financial Charges 7-Remuneration of Financial Agents 8-Remuneration of the Production Financing Company

Documents
1-Products Constituting the Minimum Price Policy Schedule 2-Minimum Prices 3-Minimum Prices - Fish, Chicken and Pigs

23-(Vacant)

24-REFINANCING
1-General Provisions
2-Operational System

Documents
1-Refinancing Request Letter
2-Demonstration of Sanction Collection - Refinancing 3-Reimbursement Scheme 4-Change of Reimbursement Scheme - Collections 5-Operations Refinanced by the Central Bank 6-Resource Movement - Development Banks and Cooperatives

25-FINANCING PROGRAM FOR PURCHASE OF IRRIGATION EQUIPMENT (PROFIR) 1-Preliminary Provisions 2-Financing 3-Technical Assistance 4-Operations with OECF Resources

Documents
1-Program Monitoring - PROFIR National
2-List of Countries Suppliers of Irrigation Equipment Financiable through PROFIR/OECF 3-Pre-Qualified Companies 4-Declaration of Origin 5-Refinanced Operations

26-SUPPORT PROGRAM FOR SMALL RURAL PRODUCER (PAPP) 1-Preliminary Provisions 2-Beneficiaries 3-Financing 4-Technical Assistance 5-Financial Agents

Documents
1-List of Municipalities Benefited by PAPP
2-PAPP - Refinanced Operation

27-NORTHEAST IRRIGATION PROGRAM (PROINE)
1-Preliminary Provisions
2-Financing
3-Technical Assistance
4-Operations with World Bank Resources

Documents
1-PROINE - High and Middle São Francisco

28-AGRICULTURAL AND LIVESTOCK INVESTMENT PROGRAM (PROINAP) 1-Preliminary Provisions 2-Financing

29-AGRICULTURAL AND MINING POLES PROGRAM OF THE AMAZON (POLAMAZÔNIA) 1-Preliminary Provisions 2-Beneficiaries and Purposes 3-Financing 4-Technical Assistance 5-Financial Agents 6-Final Provisions

Documents
1-POLAMAZÔNIA - List of Poles and Municipalities 2-POLAMAZÔNIA - Position of Applications

30-NATIONAL STORAGE PROGRAM (PRONAZEM)
1-Preliminary Provisions
2-Beneficiaries
3-Financing
4-Technical Assistance
5-Financial Agents
6-Final Provisions

Documents
1-Roadmap for Financing Proposal of Storage Unit

31-BRAZILIAN-JAPANESE COOPERATION PROGRAM FOR THE DEVELOPMENT OF THE CERRADOS - SECOND PHASE (PRODECER II) 1-Preliminary Provisions 2-Beneficiaries 3-Financing 4-Technical Assistance

Documents
1-Agreement between CAMPO and the Financial Agent

32-NATIONAL ALCOHOL PROGRAM (PROÁLCOOL)
1-General Provisions
2-Beneficiaries
3-Financing
4-Technical Assistance
5-Financial Agents

Documents
1-Commitment Letter
2-Roadmap for Elaboration of Primary and Secondary Nursery Crop Project 3-Demonstration of Applications

33-AGRICULTURAL INVESTMENT PROGRAM (PROINVEST) 1-Preliminary Provisions 2-Beneficiaries 3-Financing 4-Special Provisions regarding PROFIR and PROVÁRZEAS

34-(Vacant)

35-NATIONAL PROGRAM FOR UTILIZATION OF IRRIGABLE FLOODPLAINS (PROVÁRZEAS) 1-Preliminary Provisions 2-Financing 3-Technical Assistance 4-Operations with IDB Resources 5-Operations with KfW Resources

Documents
1-Rural Credit Area of Action - List of Municipalities 2-PROVÁRZEAS/IDB - Demonstration of Refinanced Operations 3-PROVÁRZEAS/IDB - Portfolio Position 4-PROVÁRZEAS/KfW - Demonstration of Refinanced Operations 5-Program Monitoring - PROVÁRZEAS National

36-III PROGRAM FOR INCENTIVE TO NATURAL RUBBER PRODUCTION (PROBOR III) 1-Preliminary Provisions 2-Subprogram I - Formation of Cultivated Rubber Groves 3-Subprogram II - Recovery of Cultivated Rubber Groves 4-Subprogram III - Production of Rubber Tree Plantlets 5-Subprogram IV - Recovery of Native Rubber Grove Placements with Installation of Mini-Plants 6-Subprogram V - Isolated Installation of Mini-Plants and Benefiting Plants 7-Subprogram VI - Infrastructure of Cultivated Rubber Groves Formed through PROBOR I 8-Financial Agents 9-Technical Assistance 10-Special Provisions

Documents
1-Areas of Action by Subprogram - I and III - Formation of Cultivated Rubber Groves and Production of Rubber Tree Plantlets 2-Financing Caps in ORTNs 3-Applications "in progress"

37-FREE OWN RESOURCES
1-General Provisions

38-TRANSITORY PROVISIONS (*)
1-Norms to Consolidate

39-UNCODIFIED DOCUMENTS
1-Resolutions
2-Circulars
3-Circular Letters

40-BASIC LEGISLATION
1-Law no. 4.829, of November 05, 1965
2-Decree no. 58.380, of May 10, 1966
3-Decree-Law no. 167, of February 14, 1967
4-Decree no. 62.141, of January 18, 1968
5-Decree-Law no. 784, of August 25, 1969
6-Law no. 5.969, of December 11, 1973, with the alterations introduced by Law no. 6.685, of September 03, 1979 7-Decree no. 77.120, of February 10, 1976

---

TITLE : RURAL CREDIT
CHAPTER: Preliminary Provisions - 1
SECTION : Introduction - 1

---

1 - Rural credit is considered the supply of financial resources, by institutions of the National System of Rural Credit (SNCR), for exclusive application in the purposes and conditions established in this manual.

2 - The objectives of rural credit are:
a) stimulate rural investments, including for storage, benefiting and industrialization of agricultural and livestock products, when carried out by the producer on his rural property, by his cooperatives or by a natural or legal person equated to producers; b) favor the timely and adequate costing of production and the marketing of agricultural and livestock products; c) strengthen the rural sector, notably with regard to small and medium producers; d) incentivize the introduction of rational methods in the production system, aiming at increasing productivity, improving the standard of living of rural populations and adequate soil defense.

3 - It is not a function of rural credit:
a) finance deficit or uneconomical activities; b) finance the payment of debts; c) enable the recovery of invested capital; d) favor the speculative retention of goods; e) anticipate the realization of presumable profits; f) support activities without a productive character or applications unnecessary or of mere leisure.

4 - Rural credit modalities are:
a) current rural credit; b) educational rural credit; c) special rural credit.

5 - Current rural credit is defined as the supply of resources without the concomitant provision of technical assistance at the enterprise level.

6 - Educational rural credit is defined as the supply of resources combined with the provision of technical assistance, comprising the elaboration of a project or plan and guidance to the producer.

7 - Special rural credit is defined as credit destined to:
a) rural producer cooperatives, for own applications or of the associates; b) colonization or land reform programs, in the form of Law no. 4.504, of November 30, 1964.

8 - Rural credit can have the following purposes:
a) costing; b) investment; c) marketing.

9 - Costing credit is destined to cover normal expenses of productive cycles.

10 - Investment credit is destined for applications in goods or services whose enjoyment extends over several production periods.

11 - Marketing credit is destined to cover expenses proper to the phase posterior to the collection of production or to convert into cash the titles originating from their sale or delivery by producers or their cooperatives.

12 - Rural credit operations are subject to the norms of this manual, except for specific situations authorized by the Monetary National Council or by the Central Bank.

13 - Unless express provision to the contrary, rural credit norms produce effects from their publication, not affecting operations formalized before.

---

TITLE : RURAL CREDIT
CHAPTER: Preliminary Provisions - 1
SECTION : National System of Rural Credit - 2

---

1 - It is the responsibility of the National System of Rural Credit (SNCR) to conduct financing, under the guidelines of the credit policy formulated by the Monetary National Council, in consonance with the policy of agricultural and livestock development.

2 - The SNCR is constituted of basic, linked and articulated organs.

3 - The basic organs are the Central Bank of Brazil, Banco do Brasil S.A., Banco da Amazônia S.A., Banco Nacional do Crédito Cooperativo S.A., Banco do Nordeste do Brasil S.A., Banco Meridional do Brasil S.A. and Banco de Roraima S.A. (*)

4 - The linked organs are:
a) for the purposes of Law no. 4.504, of November 30, 1964: National Bank for Economic and Social Development (BNDES); b) auxiliary: state banks, including development banks, private banks, savings banks, rural credit cooperatives and credit, financing and investment companies.

5 - The articulated organs are the official regional appreciation organs and entities providing technical assistance, whose services the financial institutions come to use in conjunction with credit, through agreement.

6 - The Monetary National Council may admit that other entities are incorporated into the SNCR, in addition to those mentioned in the previous items.

7 - The control of the SNCR, in all forms, is the attribute of the Central Bank, to which it is mainly responsible, through the Rural Credit Department:
a) direct, coordinate and supervise the compliance with the deliberations of the Monetary National Council, applicable to rural credit; b) systematize the action of the financing organs and promote its coordination with those providing technical and economic assistance to the rural producer; c) elaborate global plans for the application of rural credit and know of its execution, aiming at the evaluation of results for the introduction of appropriate corrections; d) determine the adequate means of selection and priority in the distribution of rural credit and establish measures for zoning within which the various financing organs must act, based on the plans elaborated; e) stimulate the expansion of rural credit programs, through refinancing or transfers to its financial agents; f) incentivize the expansion of the rural credit distribution network, especially through cooperatives; g) execute the training of personnel of the SNCR organs, directly or through agreements.

8 - The relationship of financial institutions with the Central Bank must be maintained through their headquarters, noting that:
a) correspondence from a financial institution that has its headquarters in the Federal District, Goiás, Mato Grosso or Mato Grosso do Sul must be forwarded to the Rural Credit Department, in Brasília; (*) b) in other cases, the correspondence must be forwarded to the Regional Department of the Central Bank that has jurisdiction over the headquarters of the financial institution; c) the instructions of the Document Catalog - CADOC, instituted by Circular no. 734, of September 29, 1982, must be observed for the sending of documents included therein.

7 - Technical advisory executors at the portfolio level must operate in each branch of the financial institution, allowing their jurisdiction to extend to a group of branches, provided this does not impair the performance of their tasks, with the duty to closely monitor the development of operations.

8 - In municipalities without a bank branch or where existing ones do not offer satisfactory assistance to small producers, an Advanced Rural Credit Post may be installed, with the objective of promoting credit assistance to those producers and providing banking services authorized by the Central Bank.

9 - The installation of an Advanced Post depends on authorization from the Central Bank/Department of Organization and Bank Authorizations - DEORB, observing the specific provisions of the Manual of Norms and Instructions - MNI.

10 - Except as provided in the following item, the Advanced Post may only grant rural credit for working capital or investment.

11 - It is admitted that the Advanced Post performs the discounting of rural promissory notes and rural bills of exchange resulting from the commercialization of harvests financed through its intermediation, up to an accumulated limit of 600 MVR per seller.

12 - The operation of an Advanced Post without compliance with the norms of this section and the Manual of Norms and Instructions - MNI constitutes a serious offense, subjecting the offender to regulatory sanctions.

---

TITLE: RURAL CREDIT
CHAPTER: Preliminary Provisions - 1
SECTION: Beneficiaries - 4

---

1 - A beneficiary of rural credit is:
a) rural producer (natural or legal person); b) rural producers' cooperative.

2 - A natural or legal person may also be a beneficiary of rural credit who, although not qualifying as a rural producer, is engaged in the following activities linked to the sector:
a) research or production of monitored or certified seedlings or seeds; b) research or production of semen for artificial insemination; c) provision of mechanized services of an agricultural or livestock nature on rural properties, including for soil protection; d) provision of artificial insemination services on rural properties; e) commercial fishing; f) crop measurement.

3 - The silviculturist may be a beneficiary of rural credit, provided that, if not emancipated, they are assisted by the National Indian Foundation (FUNAI), which must also sign the credit instrument.

4 - The following are not beneficiaries of rural credit:
a) foreign residents abroad; b) purchasers of agricultural and livestock products and their intermediaries; c) producers' associations, except for their direct operations; d) rural union; e) partner, if the partnership contract restricts access by either party to financing.

5 - It is prohibited for official or mixed-economy financial institutions to grant rural credit for fixed investments:
a) to a branch of a company headquartered abroad; b) to a company whose majority of capital with voting rights belongs to natural or legal persons residing, domiciled, or headquartered abroad.

6 - The restriction in the previous item:
a) does not apply to external resources that have been made available to a financial institution by a foreign government, its agencies, or international organizations, for on-lending to previously indicated persons; b) extends to private financial institutions, regarding applications with official resources (refinancing or on-lending); c) may be waived by the Planning Secretariat of the Presidency of the Republic, in projects of high national interest.

7 - Except for the purposes of poultry farming, market gardening, and swine farming, the beneficiary is classified as:
a) miniproducer - when the global value of their annual agricultural and livestock production does not exceed the equivalent of 200 MVR; b) small producer - when, exceeding the limit indicated in the previous letter, the global value of their annual agricultural and livestock production does not exceed the equivalent of 600 MVR; c) medium producer - when, exceeding the limit indicated in the previous letter, the global value of their annual agricultural and livestock production does not exceed the equivalent of 3,000 MVR; d) large producer - when the global value of their annual agricultural and livestock production exceeds the equivalent of 3,000 MVR.

8 - For the purposes of poultry farming and market gardening, the beneficiary is classified as:
a) miniproducer - when the global value of their annual agricultural and livestock production does not exceed the equivalent of 400 MVR; b) small producer - when, exceeding the limit indicated in the previous letter, the global value of their annual agricultural and livestock production does not exceed the equivalent of 1,200 MVR; c) medium producer - when, exceeding the limit indicated in the previous letter, the global value of their annual agricultural and livestock production does not exceed the equivalent of 6,000 MVR; d) large producer - when the global value of their annual agricultural and livestock production exceeds the equivalent of 6,000 MVR.

9 - For the purposes of swine farming, the beneficiary is classified as:
a) miniproducer - when the global value of their annual agricultural and livestock production does not exceed the equivalent of 500 MVR; b) small producer - when, exceeding the limit indicated in the previous letter, the global value of their annual agricultural and livestock production does not exceed the equivalent of 1,500 MVR; c) medium producer - when, exceeding the limit indicated in the previous letter, the global value of their annual agricultural and livestock production does not exceed the equivalent of 7,500 MVR; d) large producer - when the global value of their annual agricultural and livestock production exceeds the equivalent of 7,500 MVR.

10 - Given the provisions in the previous items, the same beneficiary may be classified simultaneously, in the same or in several financial institutions, as a small and medium producer or as a medium and large producer, depending on the purposes to which the same or several financings are destined.

11 - The global value of agricultural and livestock production is calculated based on the results of the preceding calendar year, except as provided in the following items.

12 - In the event of total or partial failure in the agricultural and livestock production of the preceding calendar year, the production of the last calendar year of normal operation is considered, if higher.

13 - In the event of starting, altering, or expanding agricultural and livestock activity, the expected results at the end of the first harvest or, if it is an activity generating continuous income, at the end of the first annual cycle, are considered.

14 - In the case of activity linked to the rural sector, the gross revenue is considered:
a) of the last social year, for a company established for more than a year; b) projected for the first complete social year, for a company in the process of establishment or established for less than a year.

15 - Classification is performed based on the MVR in effect on the last day of the calendar year or exercise considered, except as provided in the following item.

16 - The MVR in effect on the date of formalization of the credit is considered:
a) for the portion of future production related to the start, alteration, or expansion of agricultural and livestock activity; b) for a company in the process of establishment or established for less than a year, in the case of activity linked to the rural sector.

17 - The classification of condominiums or societies in the form of partnership must be performed based on the global value of the agricultural and livestock production of the activity explored in common, divided by the number of participants in the condominium or partnership.

18 - The classification of cooperatives is performed based on parameters established in a specific chapter of this manual.

19 - Subsequent reclassification of the beneficiary does not affect operations already formalized.

20 - The classification of the beneficiary is the exclusive responsibility of the financial institution, which must perform it by the means available to it, keeping in its files the appropriate proofs, for inspection purposes.

21 - The norms of rural credit relating to the small producer apply to the miniproducer.

---

TITLE: RURAL CREDIT
CHAPTER: Preliminary Provisions - 1
SECTION: Technical Assistance - 5

---

1 - Technical assistance comprises:
a) preparation of a plan or project; b) technical guidance at the property or company level.

2 - It is the responsibility of the Brazilian Company for Technical Assistance and Rural Extension (EMBRATER) to coordinate, supervise, and inspect technical assistance.

3 - Technical assistance must be provided by professionals qualified with the Regional Council of Engineering, Architecture and Agronomy (CREA), Regional Council of Veterinary Medicine (CRMV), or Regional Council of Biology and Biomedicine (CRBB), through an agreement with the financial institution or with the borrower. (*)

4 - Technical assistance may be provided by sectoral or regional development bodies, within their respective areas of operation.

5 - Technical guidance is provided directly to the producer, generally at the location of their activities, with the objective of guiding them in the effective management of the financed enterprise.

6 - The provider of technical guidance must provide the financial institution with a report of the visit to the property, recording at least:
a) stage of execution of works and services; b) technical recommendations given to the producer; c) expected production; (*) d) any irregularities.

7 - The financial institution must keep a copy of the registration form of the technical assistance provider at the branch.

8 - Technical assistance services cannot be provided by natural or legal persons who perform the following activities:
a) production or sale of inputs usable in agriculture and livestock; b) storage, processing, industrialization, or commercialization of agricultural and livestock products, unless they are of their own production.

9 - The restriction in the previous item does not apply to cooperatives.

10 - Group technical assistance is admitted in rural credit granted to small producers.

11 - Group technical assistance must be provided to groups of about twenty small rural producers who present common characteristics in terms of average size of their operations, crops or livestock, production pattern, and level of technology and income.

12 - In the case of the previous item, the technical guidance report may also be prepared in a group manner.

13 - The borrower may hire directly or replace the company or professional, for the preparation of the plan or project or for the provision of technical guidance.

14 - The financial institution must register the technician or company, in the cases of the previous item, challenging their hiring if there are restrictions or if they do not satisfy the legal and regulatory requirements for the exercise of the profession.

15 - It is up to the official technical assistance bodies, given the climatic peculiarities preceding each harvest, to define any extension of the usual planting period in the region.

---

TITLE: RURAL CREDIT
CHAPTER: Preliminary Provisions - 1
SECTION: Impediment - 7

---

1 - By loss of the concept of suitability, a natural or legal person may be prevented from participating in rural credit as a borrower, intervener, or supplier of inputs or services.

2 - Upon the finding of any irregularity in rural credit, capable of compromising the concept of suitability of the involved party, the financial institution must:
a) register the occurrence in the registration form; b) within 10 (ten) days subsequent to the verification of the occurrence, address an inquiry to the involved party under receipt, according to document no. 37 of this manual, granting them a period of 30 (thirty) days to provide explanations and present a defense; c) also inquire, in the manner of the previous letter, the directors and partners with management power, in the case of a legal person; d) forward the entire process to the Central Bank within 10 (ten) days of the end of the defense period granted to the inquired party, informing their CPF or CGC number.

3 - The process mentioned in the previous item must contain the following documents:
a) copy of the letter of inquiry and the summary of irregularities, duly received; b) response to the inquiry, if presented; c) copy of the registration form of the inquired party and, in the case of a legal person, the articles of association and subsequent amendments; d) copy of the registration form of the majority partners or those with influence, in the case of a legal person; e) copy of the credit instrument; f) statement of the linked account; g) copy of inspection reports; h) copy of the documents characterizing the irregularities; i) concluding opinion on the irregularities.

4 - The financial institution must forward the process to the Central Bank, so that an inquiry by public notice is promoted, when the place where the involved party is located is unknown, uncertain, or inaccessible.

5 - The facts and evidence must be specified in the summary of irregularities, with precision and clarity.

6 - It is up to the Central Bank, upon communication of the irregularities:
a) determine the impediment of access of the defaulting party to rural credit, as a borrower, intervener, or supplier of inputs and services, if it considers their justifications unsatisfactory; b) communicate the facts to the tax authorities or the Public Ministry, when tax fraud or criminal offense is configured.

7 - The financial institution must, based on the impediment determined by the Central Bank:
a) make an annotation in the registration form, prohibiting the impeded party from accessing rural credit as a borrower, intervener, or supplier of inputs or services; b) adopt the same measures as in the previous letter with regard to companies in which the impeded party participates directly or indirectly, as administrator, partner with management power, controller, majority shareholder, or stockholder; c) in the case of impediment of a legal person, adopt identical measures with regard to directors or partners with management power; d) promote the identification of the leaders of the impeded firm, whose names must be communicated to the Central Bank, aiming to prevent the effects of the impediment from being circumvented by the formation of new companies with their participation; e) conduct a survey of all ongoing operations, in which the impeded party appears as a borrower, intervener, or supplier of goods or services, in order to verify the normality of each one of them, with a view to their regularization, if necessary.

8 - The impediment of a cooperative member does not extend to the cooperative, except in the case of a leader of the entity, who will then be impeded until their replacement is promoted.

9 - The impediment originating from a link with an impeded natural or legal person only subsists while the link and the original impediment persist.

10 - The Central Bank may authorize the suspension of the impediment:
a) "ex-officio"; b) at the request of the offender; c) at the request of the financial institution.

11 - The suspension of the impediment is conditioned to the settlement of advantages acquired illicitly, to proof of repair of tax fraud, and to proof of the non-existence or fulfillment of criminal conviction.

12 - For the purposes of the previous item, proof of the non-existence or fulfillment of criminal conviction is made through a generic certificate from the competent judicial power and, at the discretion of the Central Bank, proof of the archiving of the police inquiry.

13 - The request for removal of impediment is delivered to the financial institution, which must forward it to the Central Bank, with a concluding opinion and an express declaration regarding the payment of sanctions and the settlement of undue advantages. (*)

14 - The registration of debts in liquidation credits must be annotated in the registration form, dispensing with the initiation of an impediment process.

15 - The impediment is disclosed by DERUR Communication, published in the Official Gazette of the Union. (*)

16 - Periodically, the Central Bank provides financial institutions with a consolidated list of impeded natural and legal persons. (*)

---

TITLE: RURAL CREDIT
CHAPTER: Basic Conditions - 2
SECTION: General Provisions - 1

---

1 - The granting of rural credit is subject to the following essential requirements:
a) suitability of the borrower; b) presentation of a budget, plan, or project, except in the financing of crops with VBC or in discount operations; c) timeliness, sufficiency, and adequacy of resources; d) observance of a schedule for use and repayment; e) inspection by the financier.

2 - In the case of a legal person, the proven suitability of its leaders is also required.

3 - The financial institution must use the normal client registration for the granting of rural credit.

4 - It is indispensable that the registration form contains the indication: (*) a) of all rural properties explored by the borrower; b) of all rural properties owned by the borrower; c) of all rural properties leased by the borrower to third parties, recording the name and CPF or CGC of the lessee; d) of the volume and gross value of production in the last three harvests.

5 - The registration form must be reviewed:
a) biennially, in the case of a natural person without organized writing; b) annually, in other cases.

6 - The biennial review of the registration form of the small producer may be replaced by indicative annotations of their experience in the rural portfolio of the branch.

7 - It is up to the repaying cooperative to prepare the registration form of the sub-borrower beneficiary.

8 - The following must also be registered:
a) the depositary of seized goods; b) the issuer of rural promissory notes and the drawee of rural bills of exchange of more than 100 MVR, when discounted; c) the natural or legal person with which the financial institution maintains an agreement for the provision of technical assistance or inspection; d) the leader or majority partner of a beneficiary company.

9 - The following constitute sufficient cause for the loss of the concept of suitability, to be annotated in the registration form, without prejudice to other regulatory measures:
a) obtaining or requesting financing for budgetary items already attended to by another financial institution; b) withdrawing a portion of credit before the time when it is actually necessary; c) failing to apply the resources for the purposes provided; d) proving the application of resources with a false or altered document; e) issuing a false or inaccurate document, to enable the borrower to prove the use of resources; f) accepting the return of goods acquired with rural credit resources, without returning to the financing institution the corresponding amounts; g) failing to make or delaying the collection of tax incentives attributed to the financed project, as provided in this manual; h) alienating guarantees without prior consent of the creditor; i) subscribing to a false inspection, technical assistance, or similar services report; j) providing false declaration or omitting information, to obtain undue advantage; l) any other discrediting conduct.

10 - The registration form must remain at the operating branch of the financial institution or, in the case of sub-lending, at the cooperative, available for inspection by the Central Bank.

11 - The granting of rural credit, the registration of its instruments, and the constitution and registration of its guarantees are independent of the presentation of:
a) certificate or proof of settlement of tax or social security obligations, except in the case of the following item; b) negative certificate of fines for infringement of the Forest Code; c) guide for the settlement of rural union contribution.

12 - The rural producer who industrializes their products or sells them directly to the consumer, at retail, or to a purchaser domiciled abroad, is obliged to present the Negative Debt Certificate (CND), issued by the Social Security.

13 - Tax or social security debts and fines for infringement of the Forest Code prevent the approval of rural credit, if the interested agency communicates to the financial institution the filing of the collection lawsuit.

14 - The financial institution notified of the filing of the collection lawsuit, in the case of the previous item, may grant rural credit to the defendant, through the constitution of guarantees sufficient to cover jointly the disputed debt and the debt to be contracted.

15 - Financing may only be granted if the defendant deposits in court the amount under dispute, when the judicial collection refers to debts originating from contributions to the National Institute of Colonization and Agrarian Reform (INCRA).

---

TITLE: RURAL CREDIT
CHAPTER: Basic Conditions - 2
SECTION: Budget, Plan, and Project - 2

---

1 - The budget for the application of resources must specify the type, value, and timing of all planned expenses and investments.

2 - It is required that the budget relating to more than one enterprise or to the working capital of different crops separately records the expenses of each, for analytical cost calculation and control of applications.

3 - The budget for intercropping must break down the funds for each, grouping only the common expenses.

4 - The budget for livestock operating expenses must be prepared with special care, in order to disseminate the use of medicines, vaccines, antiparasitics, mineral salts, vitamins, and other essential protectants for the preservation of herd health, increased productivity, and improvement of product standards.

5 - Transportation and freight expenses for inputs may be incorporated into the budget for credit purposes.

6 - It is the responsibility of technical advisory services at the portfolio level to examine the need for the presentation of a plan or project for the granting of rural credit, according to the complexity of the enterprise and its peculiarities.

7 - Technical advisory services at the portfolio level and the technician responsible for preparing the plan or project must verify the adequacy of the enterprise to environmental defense requirements.

8 - The plan or project must establish the duration of technical guidance, stipulating the most appropriate times for its provision, according to the characteristics of the enterprise.

9 - The financial institution must require an appraisal, prior inspection, measurement of crops or pasture, examination of records, feasibility study, plan, or project whenever it deems necessary.

10 - The financial institution cannot alter the budget, plan, or project without the prior consent of the person responsible for its preparation, but must refuse financing when, in its judgment, good banking practice or the norms applicable to the case are not observed.

11 - The financing limits are indicated in document no. 1 of this manual and apply to the budget or basic operating value (VBC), depending on the producer's category and the purpose of the credit.

12 - It is incumbent upon the financial institution to ensure that:
a) the credit is timely, sufficient, and adequate; b) the borrower has or will timely have the necessary own resources to meet the overall budget, when the credit is intended to satisfy part of the expenses, in order to avoid parallel financing or future paralysis of the plan.

13 - The portions of own resources required from the borrower must be applied proportionally and concomitantly with those of the credit, exceptionally admitting that the uses scheme establishes the advance of bank funds, when it is evident that the savings will only be available in a later phase, but in a timely manner and still within the validity of the operation.

14 - It is prohibited to approve credit to cover budgetary items attended to by another financial institution.

---

TITLE: RURAL CREDIT
CHAPTER: Basic Conditions - 2
SECTION: Guarantees - 3

---

1 - The choice of guarantees is at the free discretion of the financed party and the financier, who must adjust them according to the nature and term of the credit.

2 - Rural credit guarantees may consist of:
a) agricultural, livestock, commercial, or rural credit pledge; b) fiduciary alienation; c) common or rural credit mortgage; d) guarantee or suretyship; e) assignment of rights arising from lease contracts, in the case of the Federal District, with the favorable manifestation of the Government of the Federal District and the consent of the Zoobotanical Foundation; f) other assets admitted by the National Monetary Council.

3 - Agricultural pledge is defined as that constituted by contract, having as its object:
a) pending or forming crops, whether resulting from previous cultivation or spontaneous production of the soil; b) stored fruits, in natural state or processed and packaged for sale; c) timber from forests, prepared for cutting, in logs or already sawn and worked; d) cut firewood and charcoal; e) agricultural machinery and instruments.

4 - Livestock pledge is defined as that constituted by contract, having as its object animals with economic purpose.

5 - Commercial pledge is defined as that constituted by contract, having as its object:
a) "warrants" (together with their respective warehouse receipts), bill of lading, promissory notes, rural credit certificates, merchandise bills, duplicates, bills of exchange, shares, and other titles; b) deposited merchandise and products that are not subject to easy deterioration.

6 - Rural credit pledge is defined as that constituted in the rural credit certificate, having as its object:
a) assets susceptible to agricultural, livestock, or commercial pledge; b) goods originating from agricultural, extractive, or pastoral production, even if intended for processing or transformation; c) motor vehicles, mechanically propelled vehicles, and animal-drawn vehicles; d) canoes, boats, barges, and riverine or lacustrine vessels, with or without motors; e) machines and utensils intended for the preparation of rations or for processing, storage, industrialization, slaughtering, conservation, packaging, and transport of agricultural, livestock, or extractive products or by-products or used in rural activities, as well as pumps, motors, pipes, and other irrigation accessories; f) incubators, hatcheries, brooders, portable or movable coops, cages, drinkers, bells, and any machines and utensils used in poultry and agropastoral operations.

7 - The pledge may have a term:
a) of 3 (three) years, renewable for an equal period, in the case of assets susceptible to agricultural pledge, even if a rural credit pledge is constituted over them; b) of 5 (five) years, renewable for three years, in the case of animals; c) freely fixed by the parties, taking into account the nature of the assets involved, in other cases.

8 - Fiduciary alienation has movable assets as its object and is constituted by contract (public or private instrument), and its adjustment in rural credit certificates is inadmissible.

9 - Mortgage may be common or rural credit, depending on whether it is constituted by contract or by rural credit certificate.

10 - Common or rural credit mortgage may consist of rural or urban real estate.

11 - The contract for common mortgage of real estate must be drawn up by public deed.

12 - Maritime vessels and aircraft may be taken in mortgage, by contract, and it is not feasible to adjust them in rural credit certificates.

13 - Mortgage may have a term of 30 (thirty) years.

14 - The guarantee given on a rural promissory note or rural duplicate is null, except:
a) if provided by the natural persons participating in the issuing company or by other legal entities; b) in transactions between rural producers or between them and their cooperatives.

15 - Suretyship is provided through the inclusion of a special clause in the contract or in a separate document mentioned in the contract.

16 - The borrower is prohibited from alienating or encumbering the financed assets without the prior consent of the creditor, who may include them in the guarantee if deemed convenient.

17 - The guarantee may consist of assets belonging to a third party, who must sign the credit instrument as a guarantee intervener.

18 - Real guarantees are valid between the parties, regardless of registration, with all rights and privileges, except for common mortgage.

19 - The effectiveness of real guarantees against third parties depends on registration in the appropriate registries or competent bodies.

20 - Rural credit pledge is not registered, whose effectiveness against third parties arises with the inscription of the certificate in the competent registry.

21 - Rural credit pledge or fiduciary alienation of a motor vehicle must be endorsed on its registration certificate.

22 - The financial institution may release assets linked as guarantee, except if it has transferred the credit rights, by endorsement or assignment.

23 - The provision in the previous item does not apply to operations refinanced by the Central Bank, which are subject to specific norms of this manual.

24 - In the case of release of guarantees by sale of the product to the Production Financing Company (Federal Government Acquisitions - AGF), the corresponding resources necessary for the settlement of the operating loan must be transferred to the creditor financial institution by the financial agent who carried out the acquisition.

---

TITLE: RURAL CREDIT
CHAPTER: Basic Conditions - 2
SECTION: Financial Charges - 4

---

1 - Subject to the provisions in the items below, rural credit granted with mandatory resources is subject to interest of 7% p.a. (seven percent per year) and monetary correction equal to that of the National Treasury Obligations (OTN).

2 - Normal rates of rural credit are defined as the financial charges indicated in the previous item.

3 - Operating credit or for the supply of operating goods to cooperative members, granted with mandatory resources, is subject to interest of 9% p.a. (nine percent per year) and monetary correction equal to that of the National Treasury Obligations (OTN), except when formalized with a small producer or cooperative that has at least 70% of its active social structure composed of small producers.

4 - The Federal Government Loan (EGF), granted with mandatory resources, is subject to interest of 12% p.a. (twelve percent per year) and monetary correction equal to that of the National Treasury Obligations (OTN), except when formalized with a rural producer, rural producers' cooperative, or processor.

5 - In operations with mandatory resources:
a) interest is calculated on June 30, December 31, at maturity, and at debt settlement, on daily debtor balances, and its capitalization in the linked account is mandatory; b) monetary correction is mandatorily capitalized on the last business day of each month and at debt settlement, being calculated by applying the following formula:
c i t x = -------, where n x = monetary correction; c = average of daily debtor balances; i = percentage increase in the value of National Treasury Obligations (OTN) compared to the previous month, disregarding decimal places after the fourth; t = number of days elapsed from the release or the last day of the previous month until the day of settlement or the last day of the correction month; n = result of the multiplication of 100 by the number of days in the correction month (28, 29, 30, or 31).

6 - The balance of interest and monetary correction capitalized in the manner of the previous item must be amortized together with the principal installments, proportionally to the nominal values of each.

7 - The discount rate for commercialization titles, realized with mandatory resources, is periodically published by the Central Bank, based on the interest and monetary correction of Federal Government Loans (EGF) formalized with industries.

8 - The provisions of the previous items are extensible to operations carried out with resources from refinancing, transfer, or supply by the Central Bank, unless there is an express provision to the contrary.

9 - For rural credit granted with free resources of financial institutions, the rates of their common banking operations apply, observing the provisions contained in a specific section of this manual.

10 - It is prohibited to grant rural credit at rates lower than those established for the application of mandatory resources, except in the case of:
a) express provision of the Central Bank, in a specific program or credit line; b) operation backed by fiscal resources transferred to the financial institution by the federal or state public treasury.

11 - The default interest rate in rural credit is 1% p.a. (one percent per year), without prejudice to the collection of applicable monetary sanctions.

---

TITLE: RURAL CREDIT
CHAPTER: Basic Conditions - 2
SECTION: Other Expenses - 5

---

1 - Rural credit is subject to the following expenses:
a) tax on credit operations; b) commission on Federal Government Loans - EGF; c) cost of service provision; d) additional of the Program for the Guarantee of Agricultural and Livestock Activity (PROAGRO); e) monetary sanctions.

2 - No other expense may be charged to the borrower, except the exact value of expenses incurred on their behalf by the financial institution or resulting from express legal provisions.

3 - The tax on credit operations is due, calculated, and collected according to rates and form established in the Manual of Norms and Instructions of the Central Bank - MNI.

4 - Except when granted to a rural producer, the Federal Government Loan (EGF) is subject to a commission of 1.25% (one and twenty-five hundredths percent) in favor of the Production Financing Company (CFP), incident on:
a) the financing portion exceeding the value of own production and of members, in the case of rural producers' cooperatives; b) the total value of the financing, in the case of other beneficiaries.

5 - The borrower may be charged for the cost of:
a) technical guidance at the enterprise level; b) technical study (plan or project), appraisal, examination of records, expertise, and prior inspection; c) other third-party services.

6 - In the case of group technical guidance at the enterprise level, its cost may not exceed:
a) 0.3% (three tenths percent) of the nominal value of the credit, due at the time of its opening; b) 0.3% p.a. (three tenths percent per year) on the balances of the linked account after the first year of the operation's validity, due on June 30, December 31, and at maturity or debt settlement, if advanced.

7 - In the case of individual technical guidance at the enterprise level, its cost may not exceed:
a) 2% (two percent) of the nominal value of the credit, due at the time of its opening; b) 2% p.a. (two percent per year) on the balances of the linked account after the first year of the operation's validity, due on June 30, December 31, and at maturity or debt settlement, if advanced.

8 - The charging of the technical guidance rate at the enterprise level:
a) must be agreed upon in the credit instrument; b) is due while the service provision lasts, ceasing with its dispensation; c) must be recorded in the linked account.

9 - The total expenses of isolated technical study (plan or project), appraisal, examination of records, expertise, and prior inspection are limited to:
a) 0.5% (five tenths percent) of the value of the proposed credit; b) 0.5% (five tenths percent) of the debtor balance of the ongoing operation.

10 - The cost of the technical study (plan or project) is covered by the remuneration of technical guidance at the enterprise level, when its provision is required.

11 - The cost of isolated technical study regarding successive operating expenses applies only to the budget of the first year.

12 - Registration expenses, portfolio-level technical advisory, supervision, or measurement of crops and pastures cannot be charged to the borrower, unless explicit permission is granted in this manual.

13 - Payment for services to third parties depends on:
a) evidence of its necessity; b) prior written authorization of the borrower.

14 - It is permitted to capitalize in the linked account to the operation, on the due date, the cost of service provision.

15 - The norms on the PROAGRO additional and application of monetary sanctions are contained in specific sections of this manual.

16 - The charging of undue or excessive expenses is considered a serious offense, for the purposes of art. 44 of Law no. 4.595, of 31.12.64.

---

TITLE: RURAL CREDIT
CHAPTER: Basic Conditions - 2
SECTION: Utilization - 6

---

1 - Rural credit may be released in a single installment or in portions, by cash or in deposit accounts, according to the needs of the enterprise, and the uses must obey a schedule of acquisitions and services.

2 - The value of each release must be limited to one (1) month's expenses.

3 - It is lawful to release portions of the credit to cover expenses already incurred with the borrower's own resources, without constituting a recovery of invested capital, when the following cumulative conditions are met:
a) that the pertinent items constitute normal expenses of the crop financed by basic operating value (VBC) or integrate the budget considered for the granting of credit; b) that supervision proves the execution of the items to which the expenses refer.

4 - It is also admitted the release of portions referring to fertilizers, conditioners, agricultural protectants, or seeds that are supervised or certified, proven to have been acquired up to 180 (one hundred and eighty) days before the formalization of the credit and intended for the financed crop.

5 - The financial institution cannot delay releases due to omission of measures within its scope or of technical assistance.

6 - Uses may be advanced or postponed, when there is justified convenience for the assisted enterprise.

7 - Credit formalized in a certificate with multiple issuers may be used by any of them individually, unless a special clause provides otherwise.

8 - It is incumbent upon the financial institution to open a linked account for each credit, except in discount.

9 - Credit portions subject to different financial charges must be registered in distinct linked accounts.

10 - Uses, expenses, and reimbursements must be recorded in the linked account, even in the case of transfer to a deposit account.

11 - Release by transfer to a deposit account is conditioned on:
a) being provided for in the credit instrument; b) occurring at the time agreed for the use of each portion; c) not generating idle availability in the deposit account; d) the borrower having a checkbook available for free movement of the deposit account.

12 - The proper use of resources is proven by verifying that the enterprise was correctly and timely executed. (*)

13 - Irregular application or diversion of portions of the credit subjects the borrower to its repayment, with the monetary sanctions provided for in a specific section of this manual, counted from the date of its release.

---

TITLE: RURAL CREDIT
CHAPTER: Basic Conditions - 2
SECTION: Reimbursement - 7

---

1 - Rural credit must be paid in a single installment or in portions, according to the cycles of the financed operations.

2 - The term and reimbursement schedule must be established based on the beneficiary's payment capacity, in such a way that maturities coincide with the normal times of obtaining yields from the assisted activity.

3 - The payment capacity calculation of cooperatives must be made by their total revenues.

4 - It is indispensable that financial institutions carefully evaluate the producer's payment capacity, according to the income flow of the assisted operations, granting the grace period that is necessary.

5 - Grace period is understood as the period in which the beneficiary is exempt from amortizations, due to lack of revenues or by technical recommendation to apply them to the enterprise.

6 - The grace period begins on the date of signing the credit instrument and ends after the expiration of the established term.

7 - Credit repayment must begin with the obtaining of the first yields following the grace period.

8 - The sum of the grace period with the reimbursement period may not exceed the maximum term provided for the credit.

9 - Regardless of consultation with the Central Bank, the extension of the debt is due, at the same financial charges previously agreed upon in the credit instrument, provided that the borrower's payment incapacity is proven, as a consequence of:
a) difficulty in marketing products; b) crop failure, due to adverse factors; c) eventual occurrences harmful to the development of the operations.

10 - The provision in the previous item does not apply to the Federal Government Loan - EGF, which is subject to its own norms applicable to the Minimum Price Guarantee Policy.

11 - The retention of stocks of goods not delivered to cooperative members by the cooperative does not constitute a cause for extension.

12 - Extension of credit in irregular course is prohibited, unless necessary for the recovery of the enterprise or the return of the lent capital, with specific justification.

13 - The extension of portions refinanced by the Central Bank and already remitted to it must be backed by the financial institution's own resources.

14 - Delay in fulfilling any pecuniary obligation subjects the borrower to the payment of sanctions provided for in a specific section of this manual, counted from the date of default.

15 - The application of the penalty provided for in the previous item is only admissible when it is evident that the delay does not have sufficient justification to ensure the borrower the extension of the debt in the regulated manner.

---

TITLE: RURAL CREDIT
CHAPTER: Basic Conditions - 2
SECTION: Supervision - 8

---

1 - Supervision of rural credit is mandatory.

2 - Inspection must be carried out:
a) in agricultural working capital credit: at least once during the operation, before the scheduled start of the harvest; b) in the Federal Government Loan (EGF): as provided in the Minimum Price Operations Manual; c) in other financings: within 60 days after each disbursement, to verify the execution of works, services, or purchases.

3 - The inspector is responsible for verifying the correct application of budgetary resources, the development of financed activities, and the status of guarantees, if any.

4 - Any omission or negligence in verifying the correct application of budgetary resources constitutes a serious offense, subjecting the offender to regulatory sanctions.

5 - The results of the inspection must be recorded in a specific report, with the technical advisory unit at the portfolio level noting in a specific field the measures taken by the branch to rectify any irregularities found.

6 - Inspection may be carried out by an employee of the financial institution itself or by a specialized natural or legal person, through an agreement.

7 - Inspection is prohibited:
a) by a natural or legal person hired directly by the borrower to provide technical assistance at the company level; b) by a company in which the borrower participates directly or indirectly.

8 - Sampling inspection is permitted for credits with a balance not exceeding 100 MVR, without prejudice to indirect controls.

9 - Sampling consists of directly inspecting at least 10% (ten percent) of the credits indicated in the previous item, approved in each branch over the last twelve months.

10 - The branch must select credits for sampling based on criteria of broad diversification of borrowers, purposes, and regions.

11 - Direct inspection of all credits approved for the same borrower is required when the sum of outstanding balances exceeds 100 MVR.

12 - The cooperative benefiting from credit for on-lending is responsible for inspecting sub-loans, and the financier may also perform this inspection if deemed convenient.

13 - Measurement of crops or pastures is mandatory as part of the inspection when the area of a crop financed by the same financial institution exceeds 1,000 hectares on the same property, without prejudice to specific requirements of the Agricultural Activity Guarantee Program - PROAGRO.

14 - Measurement must be carried out in a timely manner to determine the extent of the planted area.

15 - Proof of an area not exceeding 1,000 hectares must be provided as part of normal inspection services, using routine methods.

16 - The Central Bank may require measurement of crops or pastures whenever, in its judgment, the analysis of data from the Common Registry of Rural Operations (RECOR) indicates this is appropriate.

17 - The presentation of spreadsheets, maps, sketches, or similar documents, with characterization of reference points and proof of the methodology adopted in the measurement, is required whenever the measured area exceeds 1,000 hectares.

18 - Measurement may be executed by a service provider company, a professional hired specifically for this purpose, or by the financial institution's own staff.

19 - Measurement by a professional from the staff of the on-lending cooperative is admissible for the purpose of inspecting sub-loans.

20 - Except for PROAGRO appraisals, the measurement of crops or pastures constitutes an inspection service, with expenses borne by the financier.

21 - In the case of measurement requested by the Central Bank, its cost must be shared among financial institutions, proportionally to the area financed by each.

22 - The borrower may be required to reimburse expenses incurred for inspection or measurement of crops and pastures in the case of:
a) failed inspection or measurement due to their fault; b) extraordinary inspection or measurement, carried out due to irregularities in their conduct; c) inspection or measurement where a reduction of more than 20% in the planted area is proven, compared to that declared in the credit instrument.

23 - The reimbursement of the cost of measurement of crops or pastures, when required from the borrower or PROAGRO, cannot exceed the following limits:
a) aerophotogrammetric method:

• 3 MVR for crops or pastures with a total area not exceeding 50 ha;
• 1 MVR per kilometer of the perimeter of the measured area, in the case of crops or pastures with a total area exceeding 50 ha;
  b) traditional methods:
• area tariff
  up to 5 ha ...... - 2 MVR from 5 ha to 10 ha ...... - 36.00% of MVR/ha from 10 ha to 50 ha ...... - 15.00% of MVR/ha from 50 ha to 100 ha ...... - 12.00% of MVR/ha from 100 ha to 200 ha ...... - 9.50% of MVR/ha from 200 ha to 400 ha ...... - 6.50% of MVR/ha from 400 ha to 600 ha ...... - 5.00% of MVR/ha from 600 ha to 800 ha ...... - 4.20% of MVR/ha from 800 ha to 1,000 ha ...... - 3.80% of MVR/ha from 1,000 ha to 2,000 ha ...... - 3.60% of MVR/ha from 2,000 ha to 5,000 ha ...... - 2.50% of MVR/ha from 5,000 ha to 10,000 ha ...... - 2.00% of MVR/ha more than 10,000 ha ...... - 1.00% of MVR/ha.

24 - For the purposes of the previous item, the following must also be observed:
a) classification into the various ranges is made based on the total area assessed in each financing, even if the crops or pastures are located in distinct plots; b) in any case, remuneration corresponding to the maximum area of the immediately preceding range is assured; c) charging additional expenses (transport, accommodation, food, and similar) is not permitted.

25 - The Central Bank is authorized to inspect rural credit operations carried out by financial institutions, including with borrowers, and the credit instrument must contain an explicit clause to this effect.

26 - The financial institution must designate an inspector to carry out inspections at the rural property level, jointly with representatives of the Central Bank, at no cost to the latter, whenever such designation is requested by the inspection of that body.

---

TITLE : RURAL CREDIT
CHAPTER: Basic Conditions - 2
SECTION : Special Provisions - 9

---

1 - The provisions of this section apply exclusively to rural credit granted at financial charges lower than the common banking operation rates practiced in the market, but are not extended to:
a) financing of products with Basic Working Capital Value (VBC); b) credit for poultry farming, horticulture, or swine farming; c) financing of working capital for small or medium-sized animals; d) credit granted to small rural producers; e) operation with a value not exceeding 600 (six hundred) MVR.

2 - The credit instrument must stipulate, in a special clause, that funds for the acquisition of goods or remuneration of services from companies must be used through direct payment to the supplier of the goods or services, against delivery of the first copy of the invoice or equivalent document, with receipt.

3 - Direct payment against receipt is admitted if the supplier of the goods or services is not legally required to issue an invoice or equivalent document.

4 - At the discretion and under the responsibility of the financial institution, when there are multiple suppliers and difficulty in direct payment, installments intended for:
a) fixed investment works; b) acquisition of animals, except in exhibitions or fairs; c) expenses with the execution of services included in the working capital budget, may be released directly to the borrower.

5 - In any case, installments referring to goods or services budgeted at a value not exceeding 3 (three) MVR must be released directly to the borrower.

6 - Payment of inputs or other goods commercialized under federal inspection must be made directly to the supplier, except in the case of the previous item.

7 - Proof of the adequate use of funds released directly to the borrower must be made alternatively:
a) by presenting paid receipts, within 30 (thirty) days; b) through a visit by those in charge of inspection, issuing a report attesting to the timely and correct execution of the undertaking.

8 - In financing for the acquisition of inputs, including fertilizers, the financial institution must observe the price due at the time of release, in accordance with the agreement between the seller and the buyer, applying rebates or increases provided in price lists, orders, invoices, or similar documents.

9 - Installments referring to inputs may only be released after their effective receipt at the borrower's rural property.

10 - In the case of partial delivery of inputs, the release of funds proportional to the quantity received by the borrower is admitted, upon presentation of a simple dispatch invoice.

11 - The first copy of the invoice or equivalent document may be returned to the borrower while the credit is still valid, with the financial institution retaining a copy obtained after stamping it with the words "FINANCED BY BANK...".

12 - The installment transferred for direct payment in another location, through a branch of the financial institution, must be recorded in the linked account on the date of its receipt by the recipient, without any cost to the borrower during the transit period.

13 - The release of funds against the presentation of a fiscal document with a value lower than that actually released constitutes an irregularity that cannot be rectified by the issuance of receipts or by the argument that the "list value" was used.

---

TITLE : RURAL CREDIT
CHAPTER: Transitional Provisions - 38
SECTION : Norms to Consolidate - 1

---

1 - Agreements between financial institutions, with a minimum term of 180 (one hundred and eighty) days, are admitted for the on-lending of resources destined for rural credit, with the loans made adjusting to the current norms for the active operations of the applying entity.

2 - The institution that delegates the execution of operations to another through an agreement is exempt from the requirement of a rural credit portfolio, but must indicate to the Central Bank the Director responsible for the operations.

3 - Financial institutions must maintain the files of rural financings at the operating branches, for inspection by the Central Bank, and the centralization of document custody at headquarters or regional coordinator offices is prohibited, whose controls must be exercised based on copies.

4 - The original of documents relating to the operation may be temporarily replaced in the file by a copy, in the event of its withdrawal for any procedure by headquarters or regional coordinator offices.

5 - Documentation related to a liquidated rural loan, including a copy of the credit instrument, must be maintained at the branch for a period of one year, for the purposes of possible inspection by the Central Bank, except for the PROAGRO rule regarding this matter.

6 - For reimbursement of measurement expenses attributable to PROAGRO, the financial institution must present to the Central Bank:
a) invoice or bill, duly paid; b) sketch with characterization of reference points; c) document proving the methodology used.

7 - Credit for the acquisition of chemical or mineral fertilizers may be granted at any time of the year, provided it does not constitute:
a) recovery of invested capital; b) storage of the product, except when destined for crops already formed or in the process of formation in the current agricultural cycle.

8 - The Central Bank credits interest of 12% p.a. and monetary correction equal to that of National Treasury Obligations on the collections required from financial institutions in administrative proceedings and similar, regarding rural credit, when its return occurs due to the provision of an appealed resource.

---

RURAL CREDIT MANUAL
2nd Part - Documents
Index

---

Number Name

1 Financing Limits (to be disclosed)
2/36 (To be disclosed)
37 IMPEDIMENT - Interrogation

---

MCR - DOCUMENT NO. 37

---

(place and date)

To:
Name(s)
Address
City

Dear Sir(s),

RURAL CREDIT - Irregularities - By order of the Central Bank, we are attaching a summary of irregularity(ies) found in rural credit operations for which you are responsible.

2.   In your interest, you may provide clarifications on the facts reported and attach supporting documents for your allegations, via correspondence addressed to this Bank, within a maximum period of 30 (thirty) days, from receipt of this letter.
   

3.     In your response, you must provide information about this company and attach documents, such as:
   

• negative certificates, issued by the Federal and State Revenue Services, with an express declaration that the damages arising from the adulteration of the invoices related in the summary(ies) have been repaired, or that there is nothing to repair regarding the invoices, which must be listed in the certificates;

• number of employees of the firm (attaching a copy of the last IAPAS payment guide, duly paid);

• sales value in the last 6 (six) months (attaching copies of the corresponding GIAs);

• share capital;

• partners or directors with management power;

• contractual changes or minutes (in the case of a Corporation) modifying the management of the firm or the share capital.

                          Regards
  

Note: in the case of a natural person, exclude the third paragraph.